After Acreage Estimates, Focus Shifts to Weather

U.S. farmers plan to plant more corn and wheat than traders expected, but markets will quickly turn their attention to weather conditions for planting and wheat crop development.

“The corn number is probably going to push this very strongly today to the high side,” said Jerry Gidel, NARMS Futures Trading grain market specialist, in comments on a CME Group panel. But he said weather and field conditions—including those in the frigid, waterlogged fields of the Dakotas—will be critical to meeting the USDA projections.

USDA's Prospective Plantings report this morning indicated:

Corn planted acreage will increase 5 percent from last year to 92.2 million acres, compared with pre-report trade estimates of about 91.67 million acres. Projected corn area would be the second highest plantings since 1944.

Soybean acreage will decline 1 percent from 2010 to 76.6 million acres, off from trade expectations of around 76.97 million acres. Despite the decline, projected soybean plantings would still be the third largest on record.

All wheat acreage will increase 8 percent to 58 million acres, up from trade expectations averaging 57.3 million acres. Winter wheat acreage is up 10 percent from last year at 41.2 million acres. Spring wheat plantings are projected up 5 percent from last year at 14.4 million acres. Durum plantings, estimated at 2.37 million acres, are down 8 percent from 2010.

All cotton plantings projected at 12.6 million acres would be up 15 percent from last year, with Upland up 14 percent at 12.3 million acres and American Pima up 24 percent at 252,500 acres.

Rice plantings of 3.02 million acres would be down 17 percent from last year.

Corn Question in Dakotas

Nearly one-third of this year's added corn acreage would come from increases of 450,000 acres in North Dakota and 850,000 acres in South Dakota. But those areas still have snow on the ground. “Where they are now, if they could get half of that, I would be impressed,” said Gidel. USDA also projected increases of at least 250,000 acres in Iowa, Kansas, Nebraska, and Ohio.

Half the corn acreage has been planted in Texas and Delta plantings should start soon to provide feed and export supplies late in summer. “Soil moisture in the South is good,” said Gidel. “But if it gets past April 15, that puts the heat on southern corn.”

Southwest Wheat Needs Rain

Weather is a big factor in the projection for a 5 percent increase in spring wheat plantings. USDA projects an 11 percent increase to 7.1 million acres of spring wheat in North Dakota, which accounts for nearly half the country's spring wheat acreage. “I'm surprised they are that optimistic about spring wheat plantings,” said Gidel.

Weather developments during the next week to 10 days in the Southwest will dictate wheat price relationships. “If we don't see a lot of rain in the next 10 days or week, which is not in the forecast now, we could start to see some significant losses and abandonment of acres in the Southwest,” he said.

Soybean Acres Shift

USDA's soybean planting estimate was slightly below the trade guesses, noted Jack Scoville, futures market analyst at The Price Futures Group. “Most of the increase will be in the Midsouth, with the Midwest holding about unchanged,” Scoville noted. The shift in acreage may limit average yields.

Lower-than-expected planted acreage and stock of soybeans suggested a higher opening for soybean futures this morning. But Scoville said any sharp rally in prices likely would bring increased selling from South America.

Even though projected rice plantings would be down 17 percent from last year's acreage, market bulls likely are disappointed, said Scoville. Many traders expected plantings to fall below 3 million acres, perhaps to 2.9 million. “We knew there was plenty of rice out there,” he said. “USDA confirmed it.”

Traders expected cotton plantings would rise to about 13.2 million acres, but USDA's projection came in short of 12.6 million. “It's probably reflective of the cost that it does take to produce cotton as well as specialized equipment you need,” said Scoville. Growers can't justify those costs if they expect strong prices for only a year or two. Cotton futures were trading higher this morning, but not up the limit. “Perhaps the lower estimate is already pretty much priced into the market,” said Scoville.